The recent surge in interest in Bitcoin exchange-traded funds (ETFs) has prompted a shift among investors, with some reallocating their holdings from gold-backed ETFs. Analysts and fund managers acknowledge the current trend but express skepticism about a long-term challenge to gold’s position.
Spot Bitcoin ETFs are emerging as an alternative for investors seeking a hedge against inflation, tracking the price of the world’s largest digital asset. The U.S. regulatory approval in January for ETFs tied to Bitcoin’s price has positioned the trillion-dollar ETF market for potential gains.
The introduction of gold ETFs in the early 2000s significantly bolstered the precious metal market by generating new demand, leading to substantial price increases in subsequent years.
“We anticipate that bitcoin could substitute for gold in some investor portfolios. It may serve a similar role as a hedge against global disorder and financial system dysfunction,” stated Jason Benowitz, senior portfolio manager at CI Roosevelt.
Following the January 10 U.S. approval, two prominent spot Bitcoin ETFs, iShares Bitcoin Trust, and Fidelity Wise Origin Bitcoin Fund, amassed $5.45 billion and $4.13 billion in assets, respectively, by February 14, according to LSEG Lipper data. In contrast, the largest gold-backed ETF, New York’s SPDR Gold Trust, experienced outflows of $768.9 million during the same period, and the iShares Gold Trust saw outflows of $284.6 million.
While the rise of crypto tokens has fueled the appeal of Bitcoin ETFs, some caution against abandoning gold ETFs due to Bitcoin’s inherent volatility.
“Gold has been valued for thousands of years, while bitcoin is in its infancy,” emphasized Bryan Armour, an ETF analyst at Morningstar.
Gold, recognized as a safe haven in times of political or economic uncertainty, is valued for wealth preservation. Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted, “Given that gold doesn’t pay dividends like many stocks, it’s more useful for wealth preservation than wealth generation.”
Streeter added a cautionary note, stating that Bitcoin speculators pursue rapid price rises with no guaranteed returns, highlighting the differing objectives between gold and Bitcoin investors.
